The UK Gambling Commission issued a consultation paper which resulted in guidance being created in 2007; The Prevention of Money Laundering and Combating the Financing of Terrorism. Money laundering has been an issue for several decades which has been addressed by the UK and European Union law makers in virtually all walks of life and business and the basic principles have remained the same: to identify people depositing and /or withdrawing money with any commercial operation and verifying the origin and purpose to which the money is being put.
How this has been implemented within the UK gambling industry reflects established practice in other industry and service sectors: identifying the customer and adopting a risk-based approach to highlighting transactions worthy of more in-depth investigation.
There are two major criticisms of the application of money laundering rules and guidance as it applies to the online gambling community: firstly, that the legislation and guidance has been drafted with traditional, offline gambling establishments in mind to the cost of the online sector, and secondly, the anti-competitive aspects of money laundering procedures to be followed particularly in terms of international gambling markets.
Nevertheless, failure to follow the guidance and the law can and will lead to severe civil and criminal penalties including prison sentences for management of companies who break the law.
Such severity of punishment follows from the identification of the UK online gambling sector as a prime target for criminals and terrorists looking to launder cash obtained from illegal sources and in the process creating perfectly acceptable and legitimate money which may be openly moved to fund further criminal and terrorist activity elsewhere.
In practice, the operator must implement money laundering policies and adhere to them as well as demonstrating this adherence. The major areas include the due diligence aspect of identifying the customer; this may be familiar to any reader who has recently opened a bank account or bought a new mobile phone - you will have been required to provide a primary and a secondary piece of identification to identify you as a person and where you reside.
In addition, transactions will be analysed and a random sample investigated further to ensure that they are genuine transactions with genuine customers. This risk based approach does not preclude the operator from taking action when a transaction is an obvious money laundering attempt or there is any degree of suspicion on the part of the operator or their staff - which leads to the question as to what you do when you discover a transaction which you suspect or know is in fact violating the money laundering rules.
Upon discovering money laundering the next step is to report it - this is a mandatory requirement and there are no exceptions. The reporting authority will initially be the line management within the operator company who are also required to nominate a money laundering officer. The money laundering officer will review and assess the incident and report the activity to external authorities as required including the police.
Throughout this process, records must be kept both of the transactions involved, the money laundering steps taken and the results of any investigative work carried out - in short, you as an operator must not only behave within the law but be able to show you have done so at every stage of the money laundering prevention process.